18th Jul 2022 14:50
(Alliance News) - Mike Ashley's Frasers Group PLC on Monday said that its former auditor Grant Thornton UK LLP has been fined over "serious failings" in its audit of Sports Direct International PLC's 2016 and 2018 financial statements.
The fines relate to the audit of Sports Direct's financial statements for the financial years ended April 24, 2016, and April 29, 2018. Frasers is a Shirebrook, England-based retail group which owns stores House of Fraser and Sports Direct.
Back in 2016, the Financial Reporting Council opened an investigation concerning the arrangement between Sports Direct and Barlin Delivery Ltd, which was not disclosed as a related-party in Grant Thornton's audited financial statements. Sports Direct merchandise was being delivered by Barlin Delivery - which is owned by John Ashley, Mike Ashley's brother.
On Monday, the FRC issued a final decision notice in respect of Grant Thornton's 2016 and 2018 audit of Sports Direct. The regulators issued financial sanctions comprising of GBP1.1 million and GBP193,375 for the 2016 and 2018 audits, respectively.
Likewise, Philip Westerman, the former Grant Thornton partner who was in charge of the audits, was handed a penalty just shy of GBP80,000.
The FRC said: “Whilst the respondents identified related parties as an area of significant risk, they failed to treat with professional scepticism management’s assertion that Delivery Company A was not a related party of Sports Direct.
“There were a number of relevant factors which should have prompted the respondents to consider and follow up matters further, but they did not,” the FRC added.
Further, Deputy Executive Counsel to the FRC Jamie Symington commented: "The audit failings in this case were serious and relate to fundamental auditing standards."
Frasers Group highlighted that the FRC findings included “no criticisms of Frasers Group, no issues in relation to Frasers Group’s historical financial statements and no findings that there were any undisclosed related party transactions within the group”.
The company also said: "Frasers Group always makes clear that its accounting principles are being conservative, consistent and simple. Frasers Group tries as far as possible to be fully transparent with the market on its financial disclosures.
"Even though Frasers Group believes it was technically correct in its disclosure of related party transactions, with hindsight further disclosure within the accounts might have avoided this particular aspect of the FRC's investigation of Grant Thornton and Philip Westerman," it added.
Shares in Frasers were up 1.9% to 720.38 pence each in London on Monday afternoon.
By Sophie Rose; [email protected]
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